What is the Value of a Memory?

Dylan Potter, CFA, CFP®, VICE PRESIDENT, WEALTH MANAGER​

Awareness is the bedrock of financial planning. Awareness of incoming and outgoing cash flows, of risks and returns, of various investment vehicles, of economic conditions, of goals. Awareness. After awareness comes control. Controlling cash flows by directing them in the right investment vehicles at the right time over a long time-horizon to achieve those goals.

Canoe on lake front

For perhaps 70% of our lives this is what we are doing. We are saving, investing, and accumulating. Part of accumulating wealth is keeping our burn rate in check. As NYU Stern Professor Scott Galloway says, “Rich is having passive income greater than your burn. People on a path to money focus on their earnings; people on a path to wealth also focus on their burn.”

One of the most difficult things to witness in my profession is the inability of some clients to spend their hard-earned money. After they’ve spent their entire lives working and accumulating wealth, they’re nearly incapable of making the mental and physical shift of enjoying their money. This is especially true when market volatility rears its ugly head and negatively affects everyone’s emotional psyche. Perhaps the inability to spend is the mental scar tissue of 1987 or the Dot Com bust or the Great Financial Crisis or the uncertainty of COVID or a terrible 2022 (note: there will always be tough times in the markets). Through multiple financial planning efforts under the most extreme scenarios, their wealth still compounds, yet they cannot bring themselves to spend money on the things they love.

At his 2017 Berkshire annual meeting, Warren Buffett recalled that his Aunt Katie, who lived to age 97, lived simply and owned $200 million worth of Berkshire stock. Yet she would write to Warren every 3–4 months: “Sorry to bother you, but am I going to run out of money?” He would write back, “Dear Katie, It’s a good question. Because if you live 986 years, you’re going to run out of money.”

This made me reflect on our own financial planning doctrine and how we frame investing. Are we really investing so our dollars retain their purchasing power to outstrip inflation? Or perhaps more importantly, are we investing so one day we can thoughtfully enjoy those hard-earned dollars with the people we love? I prefer the latter. Afterall, forgoing consumption today is only economically fruitful if we believe it will reap us a greater ability to consume in the future. If we aren’t going to enjoy the fruits of our labor every now and then, what’s the point?

This brings me to another point. What is the value of a memory? Said differently, how much is a memory worth? We can quantify the value of the plane ticket to see old friends, but the memories created by the trip are invaluable. I can confidently say there isn’t a single person who on their death bed looked back over the course of their life and wished they had saved the plane ticket money.  

As summer begins in earnest, I urge you to spend a little doing something with the people you love. I don’t mean on things. I mean on experiences. Researchers concluded that people are happier with experiential purchases over material ones irrespective of when you measure happiness: before, during, or after consumption. Experiences also provoke more satisfaction even though people typically spend more time using their material possessions. A possible explanation is the endurance of experiences in people’s memories, while the perceived value of material goods weakens over time. Memories of experiences tend to increase in value over time – even if the experience doesn’t last long. Physical “stuff” tends to last longer (gadgets, cars, jewelry, etc.), but their value usually decreases over time. Memories appreciate while physical things depreciate.

If you are struggling with a decision to spend money, try exploring the decision through the “head, heart, hunch” paradigm (something we used to say in the Rangers). The head side of a decision is the financials and the numbers. It is purely rationale. Your heart is how passionate you are to make a change. Without the heart, there will not be sufficient emotional energy to care enough to act on or prioritize the decision against competing pressures. Without the hunch (gut instinct…part of our brains that keep us from getting eaten by saber tooth tigers), there will not be enough attention to managing risks nor enough willpower to execute the decision once setbacks arise. Even though a down market may severely impact your decision from a purely rationale angle, if your heart and hunch align, then do your best to execute and don’t look back.

My grandfather was a stone mason his entire life. His stonework is all over central New York. He probably never made more than $50,000 a year. It wasn’t his income, but his income-to-expense ratio. For my grandpa, $50,000 made him a wealthy man because he maybe spent $38,000 and it was enough to make him happy and give him complete autonomy. It was enough for him to build a tiny cottage on the St. Lawrence River where he would duck hunt and fish and eventually host my siblings and I every summer of our childhood. One summer as a young kid I remember catching a very large Walleye. As I returned to the dock in our tiny rowboat the first words out of my grandpa’s mouth were, “We are going to get that fish mounted.” A few weeks later, going to pick the fish up from the taxidermist, I remember watching my grandpa fork over a check for $500. Even as a little boy I knew that was a ton of money for him…but he spent it. Even though he’s long passed, the Walleye is still on the wall of the tiny fishing cottage that he built. Now I bring my kids there. He chose to spend the money. 

Dylan Potter

Dylan is a partner, Vice President and Wealth Manager at Howe & Rusling.

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